Tuesday, July 4 2006 11:05 Hrs (IST) - World Time -

London: British companies are falling behind in the race to invest in India's fast growing economy, says a report by the Trade and Industry Select Committee.

The all-party group of MPs on the committee concluded that Britain's relationship with India should be generating a higher level of trade and investment. They found that British firms had only a partial understanding of India's economy, despite it being the fourth largest in the world, and having the second largest population.

The report said the British government's support network for people doing business in India was 'characterised by confusion'.

The report, written after panel members visited businesses in India, said: "A great deal of good work is being done, but by too many overlapping bodies with ill-defined responsibilities and often inadequate resources".

"Viewed from India, the UK is a small country and efforts need to be far more focused to have a real impact," it said.

Mid-Worcestershire MP Peter Luff, who is chairman of the committee, said: "Levels of interest in the Indian economy are growing year upon year but UK investors don't yet really understand the opportunities that India presents.

"If we are to take full advantage of this golden opportunity, UK firms must reassess their perception of the Indian economy as simply a source of low-cost labour and the UK Government must do more to help them," he said.



The report highlights how many companies view India as a source of low-cost labour rather than as an emerging market in its own right.

MPs are concerned that Britain's perception is distorted by sections of the media that focus on the perceived threat to jobs by outsourcing, particularly call centres. They feel it creates a view that these centres are the dominant feature of the Indian economy.



The report explains that there are considerable openings for investment within the manufacturing and automotive and aerospace sectors, with vast opportunities for Britain's higher education sector.

It encourages companies to become more vigilant if they are to take full advantage of India's fast liberalising economy.

Just four percent of India's exports go to Britain, compared with 17 percent to the US, six percent to China and five percent to Singapore and Hong Kong, the report said. While India's imports from China and the US account for six percent, Britain accounts for just three percent, it added.

The British Chambers of Commerce blamed the government for reducing help for exporters. David Frost, director-general, said, "Businesses are fully aware of the opportunities in India and other parts of Asia, yet they have seen export support reduced in recent years as the treasury switched its focus to encouraging inward investment."